For the first time, despite a long history of pokie rorts, a trustee has been convicted of criminal offending.

Shane Cosgrave, a former publican, will serve seven months' home detention after pleading guilty to stealing almost $364,000 of gaming funds - an amount reduced when the Crown dropped charges that had originally seen him charged with stealing the entire $975,000 in charitable funds meant for South Auckland communities.

Cosgrave, 66, owes the Department of Internal Affairs $975,000 after a civil judgment against him but will almost certainly never pay it back after a court heard he was living in near-poverty. While he is the first trustee to be convicted of pokie fraud, the history-making decision has dismayed others in the gaming industry.

Southern Trust chief executive Karen Shea called the sentence "really light, considering the community essentially missed out on nearly $1 million. Cosgrave had the benefit of all that money and I was disappointed a stronger message wasn't sent out".

When Internal Affairs refused a new licence to Cosgrave's pokie trust, the South Auckland Community Trust, in 2008, the trust signed a new contract with his management company agreeing a substantial termination fee if it closed. Shortly after, it sold out to Lion Foundation, netting Cosgrave over $681,000 in three payments.

Cosgrave also paid himself directly by two cheques, and spent yet more on refurbishing his own pub, the Clendon Inn, and paying for a leased Toyota.

When he agreed to plead guilty a day into his trial, the Crown dropped charges relating to the first two payments.

Cosgrave claimed to no longer have any of the money. The court heard it had been spent on a failed bid to stop his pub going under. He recently lost his job as a labourer and was relying on his wife's part-time earnings. He said he could pay reparations of only $10 a week, an offer that was rejected.

Judge David McNaughton said: "It's clear to me your reputation and financial security are now effectively destroyed and I accept your marriage is under severe strain as a result."

Crown lawyer Ben Hamlin submitted that the community "only tolerated the evil that is institutionalised gaming because the proceeds are conscientiously applied by people of trust and [Cosgrave] abused that trust".

Cosgrave's defence said he had no previous convictions, his offending had been short, unsophisticated and hadn't been concealed.

The conviction is a rare success for Internal Affairs, which has struggled to make charges stick.